Transcript of IMF Press Briefing

February 15, 2018

MR. RICE: Well, good morning, everyone and welcome to this briefing on behalf of the International Monetary Fund. I am Gerry Rice of the communication department and as usual this briefing will be embargoed until 10:30 a.m. and that’s Washington D.C. time. Let me begin with a few announcements and then I will take questions in the room and some things online as well.

I can tell you that tomorrow February the 16th, our Managing Director Christine Lagarde will participate in the Munich security conference. And there will be some public events related to that that you will be able to watch in real time open to the media. And you may actuallyhave seen that Madame Lagarde was speaking this morning in Paris at an event at the Bank de France with the finance minister of France, and you may have seen some news reports already on that.

I can tell you that Madame Lagarde will also be traveling to Indonesia at the end of this month and into the early part of next month. And this is part of the run up to the 2018 Annual Meetings to be held in Indonesia in October later this year. Among other things, she will give the key note address at the opening of a conference that the Bank of Indonesia is cohosting with the IMF, and that’s going to be on the topic of new growth models in a changing global landscape. That conference is on February 27th and again will be open to the media webcast and all of that.

In addition to the conference, Madame Lagarde will actually be traveling in Indonesia then for some days after the conference. She will visit the Annual Meetings’ site in Bali, and she will also be meeting with government officials, civil society, business, women and other leaders. So that’s for the Managing Director.

Also tomorrow, our Deputy Managing Director Tao Zhang will participate in a conference in the Former Yugoslav Republic of Macedonia and part of his visit to countries in the region, which includes Kosovo and Albania, and that’s the visit he is making there.

Our Deputy Managing Director, our other Deputy Managing Director, Mitsuhiro Furusawa, is also currently on a two-day visit to Mauritania, and he will be as usual having bilateral meetings with the authorities and other segments of Mauritanian society.

Let me finally mention that the media registration for our Spring Meetings, so I mentioned the Annual Meetings, but before that as you know we have the Spring Meetings coming up. That’s the week of April 16 for your calendar, beginning that week running through that weekend, and we are ready for registration.

With that let me turn to your questions in the room and I'll go online in a moment.

Good morning.

QUESTIONER: Good morning, sir, thank you. I understand that there is a team from the IMF traveling to Europe in relation to the Greek program as well to the European program for Greece. Could you please give us some background whether this trip is happening? What it includes? Is that in preparation for the next review? Is it, does it include some negotiations since this has officially started now? Thank you.

MR. RICE: I don’t have a date yet for you for the next mission of the IMF team to Athens, but we are in close contact with the Greek authorities, of course, and the European institutions, about firming those up and when we do, I will let you know.

In terms of the topics for discussion, no real news there from what we have said recently meaning that, we have been focused on how we might activate the IMF program, the approval in principle, which in turn is reliant on these two dimensions both progress on reforms and progress on debt relief for Greece, so I would expect those to be the two big buckets ofissues under discussion.

Good morning.

QUESTIONER: Thank you, sir. You were supposed to decide your next steps on the Greek program sometime during February. Now we are heading toward the end of February and nothing has happened yet. So my question is when will the Executive Board convene to decide what is next on Greece? When do you plan to announce your final decisions?

MR. RICE: You know, again I don't have a great deal of new information for you since the last time. I mean, I don't think we had ever actually said a date for when we would be making decisions. It really all depends on the progress and the discussions on those two areas that I just mentioned, which would again underlie the conditions for activating the program and that really hasn’t changed.

Good morning.

QUESTIONER: Can you share the IMF's latest thinking on Venezuela? I believe the country is in default on about 1.7 billion in bonds. Undersecretary Malpass yesterday had some harsh words for Venezuela, but he did say that at some point the U.S. would be able to assist. Where do things stand right now with the funds view on that situation?

MR. RICE: Well, the first thing I would say is obviously like I think everyone else we are very concerned by the deepening humanitarian crisis in Venezuela. The reports of the widespread shortages and the deteriorating health and sanitary conditions are troubling, of course, and I think that is true for everyone.

In terms of the IMF, our work is focused on surveillance. We have been gathering information following the situation closely, including, as I just mentioned, how the situation is affecting Venezuela and indeed affecting Venezuela's neighboring countries. You know, we have -- as I said we are trying to gather the information because we have not been able to as you know conduct our Article IV surveillance with Venezuela actually since 2004, so it's been a long time. And as I say we are trying to just gather as much information as we can.

QUESTIONER: This is a follow up to that. What would enable the Fund to be more engaged, I mean, would it require the authorities there kind of inviting you in? What is the prospect for greater Fund involvement would you say?

MR. RICE: From our side we certainly stand ready to help a member country as we do with all our member countries, of course. But yes, we serve at the request and the invitation of our member countries and so yes, that would be one of the requirements for us to be more actively engaged.

You know, just in case its useful, we did talk about Venezuela a bit in the latest WEO, sorry, the Regional Economic Outlook for the Western Hemisphere Department that we published so you will find a few things in there.

Okay. I see we have a new reporter in the room so welcome to you.

QUESTIONER: Thank you very much. I will follow up with a question of my latest colleagues. So you don’t know if you are going to participate or not with the Greek program. Can I understand why?

MR. RICE: So again, the situation hasn’t changed in that respect. The IMF participation will depend on the two elements, progress on the reforms and progress on debt relief. We have said in recent days including Madame Lagarde met with Prime Minster Tsipras in Davos fairlyrecently and spoke, commented positively on the trajectory of the reform.

On the debt, the discussions continue, I mean, those discussion have been going on since probably 2015, yes in a sense. I think the January Eurogroup statement has accelerated the technical work and discussions on debt relief, and we are, as I have said here before, we are working with our partners to arrive at a positive outcome as soon as possible, one that will credibly alleviate Greece's debt burden so that it can get back on the recovery path.

Now I don't have -- anticipating your next question, I don’t have a date for when we expect completion of that or when we would next publish our views, but obviously as soon as there is something concrete to report we will.

QUESTIONER: I wanted you to comment on it if it's possible. It says that the IMF seeks to remain in the Greek program in order to continue to have a heavy intuitional presence in the eurozone. Do you have any comment on this?

MR. RICE: Again, we serve at the requests of our member countries, so if we can be helpful to a member country in any way, then we try to do that. There are lots of different ways the IMF does that. If you look across the 189 members, sometimes it is with our economic analysis, the surveillance process that I mentioned. Sometimes it is with financial resources, and in many cases it is with our capacity development efforts on the technical assistance side so it really depends. Again, the objective is to serve the member country in the best way that we can. That’s the objective always.

And I think you can see also in many countries but even in the eurozone you can see countries where the IMF has been involved, including with financial assistance and then that financial assistance phase of the effort has ended and the IMF has continued to help in other ways with economic analysis with our regular Article IV process, which we do with every country actually. So again, how best we can save the member is the objective. Okay.

QUESTIONER: How can a possible deadlock in the debt discussion affect the clean exit from the programs?

MR. RICE: I wouldn't speculate on deadlock in debt discussions. As I just said where we are is those discussions have been ongoing; they continue. We think that the latest Eurogroup helped to accelerate the progress. We are fully engaged in those discussions. We are hoping for a positive outcome, so that’s the direction that we are headed in and that's the perspective that we have on those discussions.

If there is nothing else in the room, there are a few things online, including from Greece actually. But there is an interesting non-Greek question. Many analysts are arguing that the precipitous market drop in the last week has little to do with the projected course of interest rates or fundamentals. And that was a function of the distorted, dangerous world of new investment products and strategies. Do you agree with that?

To which you may have seen both Madam Lagarde and Maury Obsfeld, our chief economist, have both commented on the markets in recent days, but on this I would say of course there has been quite a bit of market volatility in recent days. And as the Managing Director recently said, given where asset prices were before this correction, it was probably an inevitable event.

Coming to the question, despite the volatility in recent days, we believe financial conditions remain supportive of economic growth. Financial markets continued to function in an orderly way, and the global economic recovery we expect to continue. So pretty much, what we had said a few weeks ago when we launched the update on the World Economic Outlook continues to be our overall stance on markets and the global economy. And we will be updating that of course as we run into the Spring Meetings.

There is a question on Greece. Have there been any discussions between IMF and the European partners on the Fund’s role in the post-program monitoring of Greece. How does the Fund envision future engagement with Greece?

That’s pretty close to previous questions, so probably answered that already. But again, our focus is on activating the program that we have approved in principle. That’s our focus right now so not, I wouldn't get into post-program issues.

There is a question on Zimbabwe asking about Zimbabwe's arrears to the IMF. And some commentary that the terms are anti-people and usurious, et cetera. And there is also actually a question from Zimbabwe, too, on Zimbabwe's growth outlook and how we see things.

So let me make a couple of comments on Zimbabwe. I have commented in recent briefings, very recent briefings, in some detail on Zimbabwe, so I won't do that again, but a reminder that the Managing Director Christine Lagarde met with President Mnangagwa in Davos and reiterated the Fund’s readiness to support Zimbabwe. We issued a statement at that time, so that was a few weeks ago.

In terms of the outlook, I think, as we all know, the Zimbabwean economy faces severe challenges, including an unsustainable fiscal deficit that has led to severe liquidity shortages, created inflationary pressures, and threatened the viability of the financial sector and the exchange rate regime. So restoring growth is an imperative and will require concerted efforts, including to tackle the fiscal deficit, engage in necessary structural reforms, and so on.

Our sense from our discussions with the authorities, and remembering we have a resident representative in Harari, the authorities are aware, well aware of the challenges facing the economy and have expressed their determination to address them. In that respect, we feel the 2018 budget is a step in the right direction. So where we stand is we stand ready to support the authorities, of course, in their efforts.

Zimbabwe has in fact cleared its arrears to the IMF, but of course there are other outstanding arrears to other institutions that would need to be addressed before we could move forward with the program. And of course, there are other issues beyond arrears issue that would need to be also addressed, including a range of reforms that I just mentioned. So that’s where we are.

We had the Article IV a few months ago. The Managing Director has met with the Zimbabwean authorities herself. We have a res rep on the ground, so those discussions are continuing, is where we are on Zimbabwe.

There's a question on Ukraine, so let me just take that, and then I will come back inside the room for a moment. This week the technical mission of the IMF is in Ukraine. As the Ukrainian authorities said the purpose of the mission is to discuss practical issues regarding a continuation of the EFF, the Extended Fund Facility. Can you comment on these meetings, and do you have an update?

Not much of an update beyond what I said here a few weeks ago. I can indeed confirm that at the request of the Ukrainian authorities there is a small staff team from the IMF in Kiev to discuss some technical aspects of the reforms agreed under the program, including the draft legislation on the anti-corruption court. I can also say that that visit is scheduled to be completed tomorrow.

The timing of the next review mission is not yet decided. This would be the review, the fourth review of the program with Ukraine. So I won't comment on the discussions since they are just coming to a close tomorrow, and we will have more once the mission has returned.

Good morning.

QUESTIONER: Good morning. Immediately after the presentation of India's annual budget, you were not in a position to - so do you have a mission now? What kind of ideas were presented? Some critics say it is protectionist in nature. What is the IMF impression about India's budget?

MR. RICE: Thank you. Yes, I can give you a bit more detail since the last time. We, in addition to the positive initial indication we gave last time, I think we can say we welcome the FY fiscal year 2019 budget targets and the target for a fiscal deficit of 3.3 percent of GDP. Thus returning to the path of gradual fiscal consolidation while keeping in mind the need to provide support to the nascent economic recovery in India.

The budget for 2018, '19 aims for a deficit that is smaller than the deficit that was expected in 2017 to 2018, and that is also what IMF staff had been recommending. We think the budget assumes the tax revenue will rise faster than the value of transactions in the economy, so it's ambitious, as it assumes the government will be able to collect higher tax revenue from the same amount of consumption and income.

There were also some implementations with the new goods and sales tax in 2017, so if these implementation issues persist than tax revenue collection could fall short of the budget. There are also some initiatives in the budget that are presently unfunded and the fiscal implications of these we need to look at a bit more closely as more details become available.

We are looking at these slippages on the -- potential slippages on the revenue side or higher outlays on these new policy initiatives, because they could result in cuts to capital expenditures, which we feel are important to support medium-term growth but again all that said I think the headline message is that we welcome the budget targets, and we are supportive of them.

QUESTIONER: Those that are presently unfunded. Are you referring to the healthcare announcement made by the finance minister?

MR. RICE: Yes. Well, the budget stresses as you probably know rural health, social welfare issues, but their budgetary outlays are broadly unchanged. And the government has proposed offering farmers a minimum support price of 1.5 times cost of production, and as you say, the budget speech also announced a flagship national healthcare scheme of 0.5 million rupees annually to cover 500 million beneficiaries. So, yes, these are broadly of the initiatives I was referring to.

Okay. With that I am going to say thank you very much for coming today, and we will see you in a couple of weeks.

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